Definition

There is no single overall definition of corruption, that would be universally accepted. One of the definitions of corruption is the one used by Transparency International stating it being ‘the misuse of entrusted power for private gain’. Actually, when the negotiations of the United Nations Convention against Corruption began in 2002, one of the suggestions was not to define corruption at all, but instead list specific types of acts of corruption. The different types of acts or forms of corruption are more easily defined and understood, and are the subject to numerous legal or academic definitions. If we want to capture corruption as whole, the following concepts should be considered and recognised:
  • ’Grand’ versus ‘Petty’ Corruption
  • ‘Active’ versus ‘Passive’ Corruption
  • Bribery
  • Embezzlement, Theft and Fraud
  • Extortion
  • Abuse of Discretion
  • Favouritism and Nepotism
  • Conduct Creating or Exploiting Conflicting Interests
  • Improper Political Contributions

Measure points

Occurrence of corruption
Information on the occurrence of corruption could for example include the identification of particular public or private sector activities, institutions or relationships. Data can be gathered for example about particular government agencies, or about relationships or processes, such as public service employment or the making of contracts for goods or services.

Types of corruption
Even when we want to get an overall picture on corruption, it might be reasonable to focus in detail on what types of corruption tend to occur in each specific agency, relationship or process for which corruption has been identified as a problem. Research may show for example that bribery is a major problem in government contracting, while public service appointments may be more affected by nepotism.

Costs and effects of corruption
When setting priorities and mobilising support for anti-corruption efforts, understanding the relative effects of corruption is critical. When and where it is possible, information should also include the direct economic costs and an assessment of indirect and intangible human consequences.

Factors that contribute to or are associated with corruption
A single identifiable cause of particular occurrence of corruption is rarely identified, but a number of contributing factors can usually be recognized. Information about the contributing factors are crucial to understanding the nature of corruption itself and to formulating new countermeasures. The common factors include for example: poverty or the low social and economic status of public officials that makes them more susceptible to bribery, the presence of specific corrupting influences like organized crime or structural factors such as overly broad discretionary powers and a general lack of monitoring and accountability.

The perception of corruption
It is important to measure the perception of corruption by those involved or affected by it. The information is needed because the reactions of people to anti- corruption efforts will be governed by their own perceptions. The research should include impressions of those involved about the types of corruption occuring, about the relevant standards and rules of conduct and whether corruption violates these standards and what they think are the actual impacts or effects of corruption.[1]

Building up the Corruption measurements

The first efforts to build both corruption measurements, and more largely governance measurements systems, use to be quite fragmentary and inconsistent until the 1990s, with lack of reliable and comperable data. The focus was therefore redirected to a labor of systematisation and standardisation [2] .

Through systematization it was gradually acknowledged that corruption can actually be measured. Even if there was a vast array of problems challenging such a statement and strong critisism was expressed, corruption assessment started taking place [3] through three broad ways:

1) By gathering views of significant stakeholders such as surveys of businesses, public officials, international actor e.g. NGOs and multilateral agencies, and individuals.
2) By monitoring institutional profiles of different countries, providing valuable information on possible opportunity spaces for corruption those being for example procurement practices, administrative framework or bufget management. Although the practices themselves do not measure corruption, those have been proved to be useful indicators of future trends.
3) By thorough audits of selected projects such as financial audits, spending reports, contrast between outcomes and actual results et cetera.

Indicators


Objective indicators

The biggest distinctive feature the most early appeared corruption indicators had was, that most of them were based on the perception of corruption, in other words subjective measurements, in contrast with the scarcity of objective measurements. In fact, pure obejctive measures in corruption assesment are extremely rare. Usually, when authors refer to ”objective” indicators in contrast with ”subjective”, they are still referring to the perception- based indicators. What differs the two indicators from each other is the fact that subjective indicators may include generally based questions such as ”Do you think that your government is corrupt?” whereas more ”objective” perception-based indicator would narrow their questions to real experiences, in order to get rid of attitudinal bias [4] .

More recently, efforts have been made to build pure objective corruption measurement through innovative tools[5] . Researchers Golden and Picci for example compared spending on public works on diverse regions of Italy and found out that the gaps were much higher in southern Italy [6] . Another example is the complex model developed by Olken, where he studied a particular case of infrastructure corruption in Indonesia. In that particular case, that focused on the construction of a road in local community, Olken made a comparison between corruption perception by local individuals and real corruption, measured through reported expendintures on building materials, financial audits and the final construction of the road [7] .

Subjective indicators

Most indicators rely on subjective measurements. Currently such models are based on polls and surveys in which the individuals are requested to answer different questions that intend to measure the level of corruption. The surveys may include both perception and experience based questions. Urra [8] recognises that there might be an tendency to believe that experience- based surveys are more useful than perception- based polls, but he also reminds us that perceptions do matter. Lambsdorff has for instance indicated that fighting the reputation of corrup
t actors, hereby affecting the reliability of corrupt transactions rathter than focusing on penalties may be more useful approach [9] .

The reason why fight against corruption has reached worldwide attention is due to the mutual agreement, that corruption hurts economic performance and development.
According to significant actors, such as foreign investment executives, the ”perception” of corruption has a real importance and its measurement is both necessary and useful. That is why some important perception- based indicators are further defined by international risk-assesment firms such as Standard and Poor’s or Political Risk Services.

Aggregate indicators

Beside the objective and subjective indicators, a newer generation of corruption and governance indicators appeared in the 1990s. These new indicators are constructed by combining several primary resources and have been commonly called as ”aggregate” indicators [10] . These second-generation indicators were born mostly because of the strong critisism generated by the previous indicators, even if scholars and most of the practitioners had warned about the necessity to carefully interpret the results given by the indicators [11] .

Aggregate indicators have several advantages over the individual ones, four of the main benefits[12] being that:

1) aggregate indicators enable a broader country coverage
2) they provide a useful summary of the individual ones
3) they reduce measurement error by averaging out the results and decrease the influence of a bias of indvidual source
4) they make the calculation of an explicit margin of error possible.

Three aggregate indicators stand out from the several indicators available today[13] being the Corruption Perception Index (CPI), the Business Environment and Enterprise Survey (BEEPS) and the World Governance Indicators (WGI).

The Corruption Perception Index (CPI) is an indicator built by adding a varying set of component measures. It has received critisism in terms of being inaccurate, inconsistent and its real impossiblity to aseess what a particular given degree if corruption actually means for a country. It is also however a powerful tool accepted worldwide [14] . The CPI is constructed from various sources including the World Economic forum, the Institute for Management Development, PriceWaterhouseCoopers and Freedom House and Gallup International, only to name a few. The CPI also takes into account the evalutions from previous years in order to decrease sudden variations among scores due to random effects.

The Business Environment and Enterprise Performance Survey (BEEPS) was originally an ambitious World Bank initiative built on to the mutual agreement that corruption and institutional weakness actively halted business and investment flows[15] . The data was gathered from the World Development Report and the World Business Environment Survey and the BEEPS was seen to effectively measure the quality of governance from a private sector view across 20 nations of Eastern Europe and Central Asia. It provides an excellent occasion to explore empirically the frameworks that private firms try to influence [16] . The fifth round of the indicator in 2011- 2013 will cover approximately 15 600 enterprises in 30 countries, those including for example 4200 enterprises in 37 regions of Russia[17] .

The third indicator of most importance is the World Governance Indicators (WGI). Even the indicator is not strictly a corruption indicator, it is relevant to the discussion because one of its seven dimensions centralizes in the control of corruption[18] .

Problems in the corruption measurement

Even if the critique given for one indicator has inspiration for development of another one, corruption assesment is still facing the same obstacles that it did years ago. These problems can however be gathered under a few major problem groups and divide them as the perception problem, the error problem and the utility problem.

The perception problem

Even if its acknowledged that perception matters in corruption, it also equally acknowledged that perception is not enough. Real data about actual corruption is wanted from actors involved in fighting corruption and governance issues, but unfortunately the availability of such information is scarce if not simply non-existent.

The lack of real data has led too often the misinterpret the perception indices as real levels of corruption. Also the complex statistical constructions of modern aggregate indicators can mislead to interpret them as actual corruption indicators. Research has shown that the gap be
tween perception of corruption and real corruption is even larger that has been expected before and the usage of perception indices is very problematic[19] . In other words, even the best perception indices have a potentially ver large margin of error when compared to the actual corruption [20] .

The error problem

Corruption indices that are often based on perceptions adds the difficulty of measuring the error in models for assessing corruption. To make an example, social science in general has developed to cope with error and the researcher in charge will take into account the uncertainty of the discipline when expressing her conclusions and forecasts. However when the sosiologists’ data is usually carefully gathered by herself, corruption assesment has to deal with data that already include large margins of error making it even harder to interpret.

Nowadays the best known corruption indices include different methods to manage error in their assesment. The two main kinds of measurement of error that affect corruption and government evaluation are 1) the error relative to the specific concept that is being measured, and 2) the error of defining the proxy itself [21] .

The utility problem

One of the main reasons of the growing interest on corruption research has been due to the grown interest the international development agencies have towards the issue. Corruption has rapidly developed from being a marginalized topic into a paramount must in the development agenda of almost any foreign aid institution. However all this awarness and amount of research have not been directly converted into concrete anti-corruption efforts. Corruption assesment simply can not offer direct-solutions for a particular problems.

The gap between the measurement and solutions has left a gap for international agencies to develop new categories of governance indicators to develop new ”actionable” indicators. The goal of these new kind of indicators is to measure specific features of corruption that are directly linked to policy decisions. The actionable indicators have raised concerns that they can easily lead to creation of ”reform illusion”, where the particular things chosen for measurement might be areas of quick action but other important areas not covered by ”actionable” indicators are not recognized, and therefore these partial actions do not make significant difference on outcomes[22] . Secondly these indicators can provide a quick fix on the national authorities inteested in improving their corruption ranking without making actual efforts towards fighting corruption.


Corruption measurement: Survey results in Finland

Various global governance and corruption indices have ranked Finland among the world’s least corrupt and best governed countries, given Finland the ranking 1st in 2012 and 3rd in 2013 (measured with the CPI of Transparency International). According to the report of The Group of States against Corruption (GRECO) in 2013, corruption in Finland is limited by the openness and transparency of its society, a strong system of internal and external controls and citizen and media involvement in the management of public affairs. Finland has no national anti-corruption strategy and no agency is specifically responsible with corruption prevention. Instead the prevention relies to a large degree on trust, openness and public scrutiny. According to the Eurobarometer 2012, Finland is among the five countries out of all 27 EU members states where the majority of the respodents disagreed that corruption is a problem in their country.

While the overall level of corruption is low, some recent scandals have shown that Finland is not immune to corruption and that the anti-corruption system is not as bullet-proof as the annual rankings have been suggesting. Such networks are most dominant at the municipal level, for example in relation to procurement and contruction decisions and at the boards of some major state owned companies.

The occurence of the scandals and the following media attention with widespread debate about the extent of old boys’ networks may also be why the household survey by Transparency International’s Global Corruption Barometer 2013 shows, that political parties, the private sector and the Parliament are seen as the most corrupt sectors and why 44% of the surveyed think that corruption has increased either ’little’ or ’a lot’ over the past two years. The same survey also revealed however, that sectors considered to be least affected by corruption were the police, the judiciary, the education system and the military and that corruption of the administrative type, where the bribes are paid to access public utilities and services, is virtually none existent.[23]
  1. ^ Langseth, P. (2006). Measuring corruption. Measuring Corruption, Burlington: Ashgate Publishing Company, 7-44.
  2. ^
    Court, J., G. Hyden and K. Mease (2002): “Assessing Governance: Methodological Challenges”, World Governance Survey Discussion Paper, no. 2, United Nations University
  3. ^
    Kaufmann, D., A. Kraay and M. Mastruzzi (2006): “Measuring Corruption: Myths and Realities”, Development Outreach, Vol. September 2006, pp. 124 – 137
  4. ^
    Bradburn, N. (1983): “Response Effects” in Handbook of Survey Research, ed. by P. Rossi, J. Wright and A.Anderson (New York, NY: Academic Press)
  5. ^
    Duncan, N. (2006): “The Non-Perception based measurement of Corruption: A review of Issues and Methods from a Policy Perspective”, in Measuring Corruption, ed. by J.G. Sampford (London, UK: Ashgate Publishing).
  6. ^ Golden, M. and L. Picci (2005): “Proposal for a new measure of corruption, illustrated with Italian data”, Economics and Politics, Vol. 17 (1), pp. 37 – 75.
  7. ^ Olken, B. (2006): “Corruption perceptions vs. Corruption Reality”, NBER Working Paper No.12428.
  8. ^
    Urra, F. J. (2007). "Assessing Corruption An analytical review of Corruption measurement and its problems: Perception, Error and Utility", Edmund A. Walsh School of Foreign Service (May), 1-20.
  9. ^
    Lambsdorff, J.G. (2006): “The Validity and Precision of Subjective Indicators: The Corruption Perception Index” in Measuring Corruption, ed. by J.G. Sampford (London, UK: Ashgate Publishing).
  10. ^
    Kaufmann, D., A. Kraay and P. Zoido-Lobatón (1999): “Aggregating Governance Indicators”, World Bank Policy Research Working Paper No. 2195.
  11. ^ Johnston, M. (2001): “Measuring the New Corruption Rankings: Implications for Analysis and Reform”, in Political Corruption: Concepts and Context, ed. by A.J. Heidenheimer and M.Johnston (New Brunswick, NJ : Transaction Publishers)
  12. ^
    Kaufmann, D. and A.Kraay (2007): “On Measuring Governance: Framing Issues for Debate”, Issues paper for January 11th, 2007, Roundtable on Measuring Governance, World Bank Institute and the Development Economics Vice-Presidency of the World Bank.
  13. ^
    Urra, F. J. (2007). "Assessing Corruption An analytical review of Corruption measurement and its problems: Perception, Error and Utility", Edmund A. Walsh School of Foreign Service (May), 1-20.
  14. ^
    Lambsdorff, J.G. (2006): “The Validity and Precision of Subjective Indicators: The Corruption Perception Index” in Measuring Corruption, ed. by J.G. Sampford (London, UK: Ashgate Publishing).
  15. ^
    Brunetti, A., G.Kisunko and B.Weder (1997): “Institutional obstacles to Doing Business”, World Bank Policy Research Paper, No.1759.
  16. ^ Hellman, J.S., G.Jones, D.Kaufmann and M.Schankerman (2000): “Measuring Governance, Corruption and State Capture: How Firms and Bureaucrats Shape the Business Environment in Transition Economies”, World Bank Policy Research Working Paper, No. 2312.
  17. ^ http://ebrd-beeps.com/about/
  18. ^
    Kaufmann, D., Kraay, A. and M. Mastruzzi (2005): “Governance Matters IV: Governance Indicators for 1996 – 2004”, World Bank Policy Research Working Paper, no. 3630.
  19. ^
    Donchev, D. and G. Ujhelyi (2007): “Do Corruption Indices measure Corruption?”. Working Paper, Economics Deparment, Harvard University, March 25, 2007.
  20. ^ Bertrand, M. and S. Mullainathan (2001): “Do People Mean what they say?: Implications for subjective survey Data”, American Econmic Review, Vol. 91 (2), pp. 67-72.
  21. ^
    Kaufmann, D. and A.Kraay (2007): “On Measuring Governance: Framing Issues for Debate”, Issues paper for January 11th, 2007, Roundtable on Measuring Governance, World Bank Institute and the Development Economics Vice-Presidency of the World Bank.
  22. ^
    Kaufmann, D. and A.Kraay (2007): “On Measuring Governance: Framing Issues for Debate”, Issues paper for January 11th, 2007, Roundtable on Measuring Governance, World Bank Institute and the Development Economics Vice-Presidency of the World Bank.
  23. ^
    http://www.business-anti-corruption.com/country-profiles/europe-central-asia/finland/snapshot.aspx